Pros: A considerably cheaper, smaller, and lighter version of Apple’s living room video solution, refocused primarily on video streaming while retaining the music and photo streaming capabilities of its predecessor. Streamlined menu system takes most of the best features from 2009’s Apple TV software update, adding support for Netflix subscription video streaming, as well as AirPlay media streaming from iOS 4.2 devices. New video rental catalog includes not only previously released movies and TV shows, but also a small number of films currently in or about to be released in theaters. Capable of playing purchased and rented content from an iTunes library, and from other Apple TV devices. Runs cooler and quieter than prior model.

Cons: No space for long-term user storage/synchronization of media, resulting in removal of direct-to-device media purchasing in favor of pure rental and streaming. Now has exceptionally limited TV show rental catalog; major TV studios have signaled that they will not rent content on iTunes, and some movie studios have forced 30 day waits after DVD releases for iTunes Store rentals, as well. Support for movie and TV features is even more limited outside of the United States. Remote application is imprecise due to gesture controls and can be laggy. Future expandability remains uncertain due to limited storage space and lack of App Store commitment from Apple.

Apple’s successes are now so numerous that its failures seem like aberrations, and despite its longevity, the first-generation Apple TV was unquestionably in the latter category. Released in March 2007 as a screenless iPod that could play videos, music, and photos from iTunes through any HDTV, the first-generation Apple TV was initially praised by some critics but soon thereafter shunned by mainstream consumers, leading Apple to quickly downplay the potentially powerful product as a “hobby.” Rather than embracing user hacks that improved the device’s capabilities, or responding to requests to expand the concept, the company instead kept the device locked down for its 41-month lifespan, making only occasional and generally half-hearted attempts to tweak its original, unpopular vision. Every year, the company said something like “we think we got it right this time,” but it never did: price drops, two user interface refreshes, and a trickle of new features merely kept Apple TV on life support before its discontinuation at the beginning of September, 2010.

This week, Apple released the “second-generation” Apple TV ($99), the first complete hardware redesign of the original model, and it has gone in a different direction from what fans have been requesting for the past three years. Rather than growing the device to include TV tuning and recording capabilities, an optical disc drive, the ability to run apps, or the power to play games, Apple has strategically shrunk and cut features from the prior model in order to aggressively reduce its price. Still capped at 720p resolution and wearing a streamlined version of the “version 3” interface Apple debuted in 2009 for the first Apple TV, the new model swaps prior Mac-caliber components for parts more akin to an iPod touch, losing the 160GB hard drive in favor of a different concept: pure streaming.

Apple’s latest philosophy is considerably more limited than before, as Apple TV is now being pitched first and foremost as a video rental box, asking users to pay for movie and TV show rentals from iTunes, or subscribe to Netflix’s $9 per month video streaming service as an alternative source of content. Secondarily—but from our perspective more importantly—the new Apple TV will also be capable of streaming additional content directly from iTunes-equipped computers and certain iOS 4.2 devices. Users can no longer store music, videos, or photos on the new model, but with Apple’s updated media streaming feature AirPlay, they will in November 2010 be able to play some content already stored on iPads, iPhones, and iPod touches directly through the new Apple TV to your HDTV; computers with iTunes can do this now. Finally, Apple has hinted that it may eventually offer an App Store for the Apple TV, though for the time being this remains just a pipe dream, much like all of the expectations first-generation Apple TV owners had for official apps that never came.

Rather than judging the Apple TV by its potential—a mistake that led many of the last version’s purchasers to feel disappointed—our comprehensive review of the second-generation Apple TV focuses on what this device actually offers today, while briefly considering the upcoming iOS 4.2 extension of AirPlay that Apple will offer in the near future. We first consider the new Apple TV’s redesigned hardware, then the interface, its performance with iTunes and iOS devices, and finally the opportunities Apple has to expand its functionality in the future. In short, this new $99 device is worth considering today if you’re a fan of movie rentals or have iTunes content that you’d like to enjoy frequently on a big-screen TV without buying AV cables and a dock, but it falls short of its predecessor in other regards, and will require both significant software and iTunes Store updates to become more than just a footnote in Apple’s history. Read on for all the details.

Editors' Note: iLounge only reviews products in "final" form, but many companies now change their offerings - sometimes several times - after our reviews have been published.
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